Your Business Matters: The Mazars Summer Newsletter

Life After Brexit: How Will HR Be Affected?

Given the political turmoil resulting from the Brexit referendum result, this edition of Your Business Matters has something of a Brexit flavour. Although the full impact of the UK’s decision to leave the EU will not be clear until Article 50 is invoked and negotiations are underway – likely to be next year – there are some immediate and longer-term HR issues that organisations need to consider.
Mazars looks at the implications of perhaps the biggest decision Britain has undertaken in the last 50 years…

Although most employment legislation in the UK derives from EU law, including employment rights, Brexit is unlikely to mean those laws will disappear. In the short term, all EU law will continue to apply until the UK formally leaves the EU. Looking further ahead, even when the UK does exit the EU and needs to produce its own legislation, the expectation is that it will largely conform to the EU employment framework we currently use.

The impact of the Brexit vote
Perhaps the biggest immediate HR concern for businesses is the uncertainty and insecurity that people feel as a result of the referendum result. About 6% of the UK’s workforce is from the EU (13% in London). A sizeable number may be making preparations to go elsewhere in Europe while the decision is in their hands, rather than waiting to see what happens. There is also a significant number of British people who a) didn’t vote for Brexit, b) could potentially work elsewhere in the EU, and c) are not convinced by the UK’s prospects outside the EU. So employers need to be aware that the Brexit decision could affect their British staff, as well as any other EU nationals, and put plans in place to ensure their business’s long-term stability.There are three main areas employers should focus on to reduce the potential impact of Brexit:
1. Talk to your staff
Employers and employees need to ensure there is trust and open dialogue between all parties. Talk to your employees and listen to their concerns. Find out how they feel. Try to discover what their plans are and what they’re thinking, and work hard to reassure them that you’re doing everything you can to address their concerns, keep the business on course and minimise the impact of Brexit.
2. Map your workforce’s skills and knowledge
Mapping is key to business continuity. Take time to assess and map who’s got the skills, knowledge and client relationships within your business. This gives you a clearer understanding of the potential skills gaps if staff members leave, and puts you in a stronger position to manage any changes.
3. Show you value your employees
Employers need to make an effort to demonstrate that you really do value all your employees and the contribution they make. Reinforce the message that you need them and want them to stay, and that doing so is in their interests.Warning signs
Business owners should watch for warning signs that may indicate employees are unsettled. Monitor the statistics around absence and sickness levels, and keep your ears open to what’s being gossiped about in the office. It only takes one employee to be negative and it can very quickly affect everyone else. The sooner you spot a potential downturn in morale, the sooner you can address it.Don’t delay
Business owners need to ensure morale, productivity levels and engagement are maintained and the only way to do that is by speaking with staff, encouraging conversation and answering questions. Everyone has a right to know what’s going on and whether they’re going to be OK.
Think about what’s going to happen over the next two-to-five years and start discussions with your staff – especially key employees you don’t want to lose. There will inevitably be some people who won’t be convinced to stay, regardless of what you do, so contingency plans are crucial.

Pension planning has never been more important for business owners

One year since the so-called ‘pensions freedoms’ were introduced, we look at the impact of some of the biggest pensions reforms for a century. Are savers sticking with annuities, or are they drawing their cash as soon possible? And are you taking the right steps to secure your own happy retirement?
Amid the uncertainty of Brexit, it’s more important than ever to mitigate any financial exposure with informed decisions about your long-term finances.
For those approaching retirement, Britain’s vote to leave the EU is an added layer of confusion in an area that has already left many facing unfamiliar choices over the last 12 months.
With as many as 20 per cent of people retiring from work being ‘slightly nervous’ that their funds won’t cover their retirement ambitions, it’s important to act quickly to ensure you’re getting the best deal for your later years. What are my new pension options?
Under the old rules, those who paid into pension funds were trapped: their only option on retirement was to take an annuity. To make matters worse, annuities often paid poorly, leaving responsible savers facing a worse financial situation than they had expected. However, everything changed in April 2015. Savers now have three options:
1. Take an annuity as before
2. Withdraw the full amount of your pension savings to spend however
3. Invest pension savings and take smaller amounts as and when required
The pension reforms of April 2015 certainly caused a flurry of interest and activity: there were reports of insurers dealing with an increase of 80% more phone enquiries. Initial findings seemed to suggest that those who withdrew the full amount from their pension pot (which amounted to 95% of those who opted for any kind of lump sum) had relatively small pots (typically less than £20,000).
Annuities also remained popular: almost 40 per cent of the £2.5 billion paid out to savers in the first three months following the pension reforms’ introduction was used to secure annuities.Why pensions are still important for owner managers?
We regularly hear owner-managers telling us their retirement is taken care of. Their plan, they insist, is to sell their business and that the sale will comfortably provide enough cash to fund their retirement.
This is nevertheless a risky approach. You are gambling that your business holds its value and you can find a suitable buyer. And by failing to invest in a pension fund, you are also missing out on a number of tax breaks, for both your company and yourself.What are the benefits to my company of funding my pension?
Funding your pension from your business’s profits is tax-effective and less risky than relying on its sale to pay.
Pension contributions made by your company attract corporation tax relief of up to 20% against the company’s profits, and do not attract national insurance contributions (NICs).
Any capital gains made in a pension fund are also tax-free, which is why a growing number of business owners are using their SIPP or SSAS to purchase the commercial property of their business instead of paying rent.Essentially, there are three mainstream types of pension:
– Personal or stakeholder: this is an ‘off-the-peg’ pension typically offered by an insurance company. The possible investments are restricted to cash or specific funds.
– Self-invested personal pension (SIPP): a SIPP gives you the freedom to choose your own investment options.
– Small self-administered scheme (SSAS): these unique schemes with flexible investment powers are designed for owners and family members of an owner-managed business. Even if you are 50 years old, investing the maximum of £40,000 per year until retirement at 65 could leave you with a fund worth £681,872 (assuming 5% annual investment growth and 2.5% inflation). The main rule is, it’s never too late to start funding a pension. Mazars have developed a financial modelling service that can help clients to understand their financial prospects.For more information about any of the issues raised here, visit www.mazars.co.uk.